News

Global Market Report - 4 September

Australia

The Australian share market is expected to open lower after weak factory data hurt Wall St and spurred fears about global growth.

The SPI200 futures contract was down 39 points, or 0.60 per cent, at 6,515.0 at 8am Sydney time, suggesting a negative start for the benchmark S&P/ASX200 on Wednesday.

The Australian share market finished yesterday flat, while the Aussie dollar dipped to close to a recent 10-year low on weak retail sales figures.

The benchmark S&P/ASX200 index closed on Tuesday down six points, or 0.09 per cent, to 6,573.4 points, while the broader All Ordinaries was down 4 points, or 0.06 per cent, to 6,673.5 points.

In the US, investors fled riskier assets as the latest round of tariffs and the lack of a date for a resumption of US-China talks gnawed at any hopes for a resolution to the long-running trade war, which has rattled markets for months and weighed on world economies.

On Wall Street, the Dow Jones Industrial Average finished down 1.08 per cent, the S&P 500 was down 0.69 per cent and the tech-heavy Nasdaq Composite was down 1.11 per cent.

The Australian Bureau of Statistics will release the country's quarterly GDP figures at 1130 Sydney time on Wednesday.

The Aussie dollar rebounded overnight and is buying 67.58 US cents from 67.25 US cents on Tuesday.

Asia

China stocks clawed back from earlier losses to close higher on Tuesday, helped by gains in tech firms as Beijing pushes for self-sufficiency in the sector amid a protracted trade war with the US.

The blue-chip CSI300 index rose 0.1 per cent, to 3,853.61, while the Shanghai Composite Index added 0.2 per cent, to 2,930.15.

Hong Kong stocks fell on Tuesday as a deepening political crisis threatens to plunge the city into economic recession, while festering Sino-US trade tensions continue to curb risk appetite.

But the decline was limited amid signs capital from mainland China is flooding the Hong Kong equity market.

The Hang Seng index fell 0.4 per cent, to 25,527.85, while the China Enterprises Index lost 0.7 per cent, to 10,035.78.

Around the region, MSCI’s Asia ex-Japan stock index was weaker by 0.73 per cent, while Japan’s Nikkei index closed up 0.02 per cent.

Europe

European shares retreated from a 1-month high on Tuesday as weak US factory data added to worries about global growth, while uncertainty over Britain’s chaotic exit from the European Union knocked the FTSE 100 lower after a four-day run of gains.

The pan-European STOXX 600 index dropped 0.2 per cent at the close after falling as much as 0.7 per cent following the release of data showing US manufacturing activity contracted for the first time in three years in August.

The Institute for Supply Management’s latest numbers came as stark evidence of the US-China trade war taking a toll on global growth, sending risky assets such as oil and global stocks lower.

Europe had its own headache to deal with. After British Prime Minister Boris Johnson on Monday implicitly warned politicians to back him on Brexit or face an election, an alliance of opposition politicians and rebels in Johnson’s Conservative Party began a bid to stop to block a no-deal exit.

Johnson lost his working majority in parliament when one of his Conservative politicians defected to the pro-European Union Liberal Democrats.

London's mid-cap stocks, traditionally harder hit by Brexit concerns, bounced off early lows to close down 0.1 per cent while the blue-chip index fell 0.2 per cent as sterling rebounded.

European stocks gained some ground after Reuters reported that European Central Bank policymakers are leaning toward a stimulus package that includes a rate cut, a beefed-up pledge to keep rates low for longer and compensation for banks over the side-effects of negative rates, according to sources.

The ECB has all but promised to announce more stimulus after its 12 September meeting to support a slowing eurozone economy, hit by an escalation in the US-China trade war.

After both sides imposed tariffs on each other’s goods, Washington and Beijing officials are struggling to schedule a meeting this month to renew trade talks, Bloomberg reported on Monday.

The rising worries encouraged investors to shift away from risky equities to safe-haven assets such as government bonds, resulting in yields on German and Italian 10-year bonds hitting a record low.

Trade-sensitive shares of Germany and France were down about 0.4 per cent each, while Milan-listed shares closed down 0.3 per cent.

In Italy, members of 5-Star are holding a ballot on the party’s internet platform on Tuesday to decide whether the group should join forces with the Democratic Party, its traditional foe, and expectations are that 5-Star members will approve a coalition deal.

Defensive sectors such as utilities and telecoms were among the few sectors gaining in the STOXX 600, while oil and gas companies led decliners with a 0.9 per cent loss as oil prices sank.

Shares of Takeaway.com dropped 5.9 per cent after a top shareholder in Just Eat said it would vote against the British food delivery company’s proposed 9 billion pound ($11 billion) merger with Takeaway.com. Shares of Just Eat slid 2.8 per cent, dragging the retail index down 0.4 per cent.

France’s second largest telecoms operator Iliad fell 6.3 per cent, the biggest decliner on the STOXX 600, after it reported a loss of 127,000 mobile subscribers to competitors in the first half of the year.

North America

US stocks have fallen as investors worried about global growth prospects after data showed US factory activity shrank in August for the first time since 2016 and the US and China imposed new tariffs on each other over the weekend.

Compounding the uncertainty, the Institute for Supply Management said early on Tuesday its index of national factory activity dropped to 49.1, compared with a reading of 51.1 estimated by analysts polled by Reuters.

He also cited growing uncertainty around Brexit as a concern for investors. British MPs on Tuesday triggered a vote that could allow them to stop Boris Johnson pursuing a no-deal Brexit, a challenge that the government warned would prompt the prime minister to seek an election on October 14.

Earlier in the day, data showed British construction companies last month suffered the sharpest drop in new orders since the financial crisis amid Brexit jitters.

The Dow Jones Industrial Average on Tuesday fell 285.26 points, or 1.08 per cent, to 26,118.02; the S&P 500 lost 20.19 points, or 0.69 per cent, to 2,906.27; and the Nasdaq Composite dropped 88.72 points, or 1.11 per cent, to 7,874.16.

Trade-sensitive industrials fell 1.4 per cent, making for the biggest percentage loser among the S&P 11 major sectors. Technology stocks fell 1.3 per cent, weighed down by chipmakers, which have a large revenue exposure to China. The Philadelphia Semiconductor index dropped 1.8 per cent.

Boeing shares tumbled 2.7 per cent, providing the biggest drag for the Dow, after the Federal Aviation Administration said on Friday a global panel of experts will need a few more weeks to finish its review of the company's 737 MAX certification.

US casino operators felt the brunt of slowing economic growth in China as gambling hub Macau posted weak August casino revenue. Shares of Las Vegas Sands, Wynn Resorts and MGM Resorts International fell between 2 per cent and almost 4 per cent.

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